MOSCOW, September 6 (RIA Novosti political commentator Peter Lavelle). Vladimir Putin's Thursday visit to Berlin is expected to be concluded with the inking of not only an agreement to start a major new project to increase gas exports to Germany, but also of a loan agreement for Rosneftegaz, to pay for the Gazprom shares recently acquired by the holding company.
Gazprom is not just an energy giant: it is Russia's most important foreign policy tool.
Putin and German Chancellor Gerhard Schroeder are slated to sign an agreement significantly increasing the amount of natural gas Germany will eventually purchase from Russia. The existing pipeline delivering gas to the German market is expected to reach full capacity sometime in 2006. As recently as last week, Germany's Economy Minister Wolfgang Clement stated that the energy relationship between the countries was of critical importance and needed to be expanded.
The energy agreement to be signed this week is the proposed North European Pipeline that will transport natural gas to Germany and, at a later phase, to the UK. Additionally, it has been reported that Gazprom intends to establish a number of joint ventures with German companies, including E.ON and BASF, to develop the project.
The North European Pipeline project is not without controversy. It was originally mulled years ago and many German politicians have since then expressed concern of being overly dependent on Russian gas exports. The Baltic states and Poland also expressed concerns over the prospective route of the pipeline, designed to bypass both. The Poles and Balts have lobbied German politicians to have the pipeline re-routed for reasons of energy security and transit fees.
The pipeline is also a political issue, with German voters going to the polls to elect a new parliament on September 18. Schroeder's main challenger, Christian Democrat Angela Merkel, leads in the polls and has said that she will support the requests by Poland and the Baltic States to have the new gas pipeline routed across their territory. Depending on the election outcome, the pipeline's route could be changed, though it will probably make little difference to Gazprom, as Germany needs additional gas supplies as soon as possible.
To the Kremlin, Gazprom's export expansion is almost synonymous with Russia's foreign policy objectives. Speaking to a group of Western experts on Russia on Monday, Putin promised to reinvigorate the East-West energy dialogue, which stalled with the assault on the Yukos empire and the state's reassertion of its hegemony in the oil and gas sector, as well as to make good on his intention to make international energy relations an important priority when Russia takes over the chair of the G8 in January next year.
Putin's Berlin visit may also entail a loan agreement for Rosneftegaz to fund payment for the Gazprom shares recently acquired by that holding company. That would give Gazprom increased resources to continue its investment drive, most certainly in Russia's oil patch, as well as hasten "ring-fence" removal that should promote the company's long-term stock potential.
The loan agreement could also have a meaningful impact, in ending the "oil wars" among competing Kremlin energy factions (the Gazprom lobby vs. the Rosneft lobby), and allow the Kremlin to successfully execute its "operation successor" when Putin is scheduled to leave office in 2008.
Gazprom is about to enter a major expansion phase after nearly six years of stagnant growth. Signing the North European Pipeline deal with Germany is an important step, demonstrating that the Kremlin now sees it as an all-important foreign policy tool, and that Russia has every intention to be as active on the international stage as its flagship company. Wisely, the Kremlin and Gazprom intend to resolve domestic rivalries at home before the natural oil and gas giant faces the world as an extension and expression of Russian foreign policy.
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